US consumer confidence drops; UK interest rates to fall ‘gradually’; stocks hit record high after China’s stimulus blitz – as it happened

Time to wrap up….

Over in Liverpool, Keir Starmer has announced that Britain’s new state-backed power company GB Energy will be headquartered in Aberdeen.

The prime minister told Labour’s annual conference:

“We said GB Energy, our publicly-owned national champion, the vehicle that will drive forward our mission on clean energy, belonged in Scotland. And it does.”

But the truth is, it could only really ever be based in one place in Scotland. So today I can confirm that the future of British energy will be powered, as it has been for decades by the talent and skills of the working people in the Granite City with GB Energy based in Aberdeen.

GB Energy is a flagship policy of the Labour government; it will not supply electricity directly to households but instead plans to develop, invest in and own renewable energy projects.

Newsflash: US consumer confidence has fallen at its fastest rate in three years, as people worry about their job security.

The Conference Board Consumer Confidence Index has fallen this month to 98.7, down from an upwardly revised 105.6 in August.

The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell by 10.3 points to 124.3. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—declined by 4.6 points to 81.7, but remained above 80. (A reading below the threshold of 80 usually signals a recession ahead.)

The drop in confidence was steepest for consumers aged 35 to 54, the Conference Board reports.

“Consumer confidence dropped in September to near the bottom of the narrow range that has prevailed over the past two years,” said Dana M. Peterson, chief economist at The Conference Board.

Peterson says:

“September’s decline was the largest since August 2021 and all five components of the Index deteriorated. Consumers’ assessments of current business conditions turned negative while views of the current labor market situation softened further.

Consumers were also more pessimistic about future labor market conditions and less positive about future business conditions and future income.

The cutoff date for the preliminary results was 17 September, the day before the US Federal Reserve cut US interest rates by half a percent. That move should support the economy, and might calm some worries about the labor market.

Dulux paint maker Akzo Nobel said today it plans to cut about 2,000 jobs globally, more than 5% of its workforce.

The cost-cutting drive will targeting positions in its head offices, the Dutch company – which bought Britain’s ICI back in 2007 – said.

“We will be simplifying our structure, our processes, reducing cost of administrative functions,” Akzo Nobel’s senior spokesperson told Reuters, with positions in finance or global business services at the head offices to be affected.

US house prices remained at a record high in July, as the prospect of cuts to US interest rates pushed down mortgage rates.

The S&P CoreLogic Case-Shiller U.S. National Home Price index shows that US house prices rose by 5% in July, a slowdown on the 5.5% rise reported in June.

Prices in 10 major US cities rose by 6.8%, including an 8.8% rise in New York, followed by Las Vegas (+8.2%) and Los Angeles (+7.2%).

Brian D. Luke, head of commodities, real & digital assets at S&P Dow Jones Indices, points out that house prices – like the stock market – are rising faster than inflation:

“While the S&P 500 has achieved 39 record highs and the S&P GSCI Gold TR hit 35 record highs, housing is following a similar trajectory. The growth has come at a cost, with all but two markets decelerating last month, eight markets seeing monthly declines, and the slowest annual growth nationally in 2024.

Overall, the indices continue to grow at a rate that exceeds long-run averages after accounting for inflation.

Global equities have hit a record high today, after China’s central bank announced new measures to stimulate its economy, support its property sector and boost the stock market.

The MSCI world stocks index has gained 0.3% to touch a record high today, Reuters reports. The rally was driven by Asia-Pacific markets, where China’s CSI 300 index jumped over 4% today.

Economists are warning, though, that Beijing’s government will need to go further to add to the measures from the People’s Bank of China.

Yingrui Wang, China economist at AXA Investment Manager, says:

The newly announced package is designed to ease monetary conditions across the broader economy, with a particular focus on the housing market.

The measures include reductions in the RRR, policy rate, outstanding mortgage rate, and minimum down payment ratio for second homes. Additionally, the re-lending programme for the housing stock buy-back scheme will be strengthened, and restrictions on the equity market will be loosened. This announcement aligns broadly with expectations, though it leans slightly stronger than anticipated.

However, it is unlikely to outweigh the current entrenched economic downturn – coordination from fiscal policy is needed to ensure a good efficacy.

Robert Gilhooly, senior emerging markets economist at abrdn, also doubts China’s policy measures will turn around its economy conclusively.

Gilhooly explains:

Compared to the incremental approach we have become accustomed to – which even saw one key policy rate adjusted by as little as 5bp on one occasion – today’s package is more meaningful, but beating low expectations is a far cry from a package that will conclusively turn around the economy and market sentiment.

The 50bp cut to existing mortgage holders’ borrowing costs is the closest thing we’ve had to a fiscal transfer for households. But other measures to support the property market still appear unlikely to deal with incomplete apartments, which ultimately need someone (local or central government) to bear a substantial fiscal cost. Overall, household spending is likely to remain constrained by the negative wealth effect from falling house prices and a weak labour market.”

France’s borrowing costs have risen above Spain’s for the first time since the financial crisis over 15 years ago.

The yield (or rate of return) on French 10-year government bonds rose as high as 2.986% this morning, slightly higher than the equivalent Spanish 10-year bond, data on LSEG shows, before dipping back.

Bond yields move inversely to prices (ie, they rise when the bond price falls).

The move shows investors are worried about the new French government’s ability to tackle the high budget deficit.

Last weekend, president Emmanuel Macron named a new government led by the prime minister, Michel Barnier. Barnier’s first major task is to submit a 2025 budget plan addressing France’s financial situation, which the PM has called “very serious”.

But, opposition MPs are putting Barnier under immediate pressure, with plans for a no-confidence motion in parliament.

Following the parliamentary elections in July, a leftwing alliance, the New Popular Front (NFP), is now the largest group in parliament, while Marine Le Pen’s far-right National Rally (RN) was the most successful single party in the race.

Yesterday, the gap between French and safe-haven German debt widened.

As Jim Reid of Deutsche Bank told clients:

The move follows the announcement of new ministers over the weekend, but there’s still uncertainty about how long this government will survive, as they don’t have a majority in the National Assembly, and will rely on other parties not voting them down.

Earlier today, the new French finance minister – Antoine Armand – said France now has “one of the worst” public deficits in its modern history.

Armand told broadcaster France Inter:

“Apart from one or two one-off crisis years in the past 50 (years), we have one of the worst deficits in our history.

“On that level, the situation is grave.”

The deficit is expected to reach 5.6% or more of national output this year, AFP reports, almost double the European Union limit.

UK motor finance probe extended, again

Kalyeena Makortoff

The FCA has confirmed that it is extending its investigation into motor finance by another 8 months, after a brief consultation over plans to delay the probe.

The regulator is looking into whether consumers had been charged inflated prices for car loans, as a result of open commission arrangements, between 2007 and 2021.

A decision on how to handle the matter – including whether there would be a compensation scheme – was originally due this week. But the FCA said in July it wanted to push that decision to May 2025, after firms took longer than expected to submit data to the regulator. That new date has now been confirmed.

The financial watchdog is also hoping this will leave time for a final ruling on a case that Barclays is battling in the courts that could set precedent on the matter.

In July, the FCA said it was “more likely”to have to prepare a compensation scheme that some analysts have previously estimated could cost lenders billions of pounds.

Customers of TSB bank have reported problems with payments not going through to their accounts.

Several customers have found that their salaries, or child benefit payments, have not arrived as expected today.

TSB has apologised, saying it is working on a fix:

“We’re aware of an issue with some BACS payments not yet showing on customers’ accounts. We are working on fixing this and will provide an update as soon as possible.”

Share in mining companies have jumped today, after China’s central bank unleashed a swathe of stimulus measures to spur growth and prop up its property sector (see opening post).

Traders are betting that the stimulus will lead to higher demand for commodities such as iron ore, copper and coal, as well as oil.

Mining giant Anglo American are the top riser on the FTSE 100 share index, up 6.9%, followed by copper producer Antofagasta (+5.4%), Rio Tinto (+4.6%) and Glencore (+4.5%).

Earlier today, iron ore contracts in China jumped by around 5%, while copper has hit a 10-week high in London this morning, at $9,737 per tonne.

Financial firms focused on Asia are also rallying – Prudential are 4.4% higher, followed by Standard Chartered (+4%).

This has helped to lift the FTSE 100 blue-chip share index by 0.25% to 8280 points this morning.

Fiona Cincotta, market analyst at financial services firm StoneX, says:

Miners have surged on the news of the Chinese stimulus measures. The prospect of stronger growth in China, the world’s largest consumer of metals, has boosted metal prices.

The likes of Anglo-American and Antofagasta are topping the Footsie leaderboard as they track metal prices higher.

Another day, another sign that Germany’s economy is weakening.

This morning, we’ve just learned that sentiment has deteriorated again at companies in Germany.

The ifo Business Climate Index has fallen for the fourth month running, to 85.4 points in September, down from 86.6 points in August.

Companies reported they were less satisfied with the current business situation, and also becoming more pessimistic about the outlook for the coming months.

Ifo, the economic research group, says:

The German economy is coming under ever-increasing pressure.

The survey found that sentiment among German manufacturers has fallen to its lowest since June 2020, early in the Covid-19 pandemic.

Yesterday, a survey of German purchasing managers showed a contraction in manufacturing this month, making it more likely Germany falls into recession this quarter.

Ifo also reports that the business climate also declined in the services sector, and in trade.

Ifo adds:

In trade, the index has fallen. In particular, the outlook for the coming months was again marked by increased skepticism. Traders also assessed their current situation to be slightly poorer.